Public Sector Wages Must Be Contained - IMF

The International Monetary Fund (IMF) Director for Africa, Ms Antoinette Sayeh, has said the Government has to contain the public sector wage bill in order to free resources to invest in other social infrastructure.

Speaking at a press conference in Istanbul, Turkey, on the outlook of sub-Saharan Africa, Ms Sayeh stated that there were significant pressures that impacted negatively on the budget, and that needed to be dealt with.

Reports indicate that the Government’s hands had been tied by conditionalities which included a net freeze on employment.

The IMF Director for Africa, however, distanced the IMF from the civil service reforms, stating that “in the civil service reform area, the Fund is not in the lead on those issues. The World Bank and other partners are supporting the Government in that regard”.

Ms Sayeh, who is a former Finance Minister for Liberia, said the programme put forward by the Fund was meant to address the macroeconomic imbalances that the economy was faced with.

She said the Fund was working to support the Government to address the problems of high inflation and the fiscal side of the macro-economic problems.

On the outlook for the sub-region, which was titled “Weathering the Storm”, Ms Sayeh mentioned three issues that could trigger growth in the sub-region.

These, she mentioned, were the forces for recovery in the sub-region and the risks around the recovery; the national policies to sustain this recovery and IMF’s expansion and reform to help support African government’s.

The African Director said the Fund was cautiously optimistic about the economic prospects for the sub-region.

“Our central forecast is for growth of just four per cent in 2010, very much below where the sub-region had been”.

The average of five and six per cent growth for the sub-region was recorded between 2004 and 2008.

She said beyond 2011, the fund expected the region to return to average growth of about six per cent.

However, Ms Sayeh cautioned against the uncertainties in the regional outlook on account of reliable data and the uncertainties surrounding macroeconomics developments in the region.

According to the IMF, governments within the sub-region had retained open policies and had rather used macro positions to try and absorb the shocks of the global crisis.

Ms Sayeh called for the need to refocus fiscal policies on long-term objectives of growth and debt sustainability as the crises begin to unwind.

“In most countries, the active use of fiscal and monetary policy to support demand has been absolutely correct, and that these policies need to be sustained for the time being until the recovery is well in hand,” he stressed.

Author : Boahene Asamoah